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accounting test 2

A cost that is relevant in one decision may not be relevant in another decision.
True
In a decision to drop a product, the product should not be charged for factory rent if the space in which the product is produced has no alternative use and the rental payment is unavoidable.
true
In a sell or process further decision, which of the following costs is relevant?
A variable production cost incurred after split-off.
opportunity costs
opportunity costs are relevant in decision making
A national retail company has segmented its income statement by sales territories. If each sales territory statement is further segmented by individual stores, which of the following will most likely occur?
some traceable fixed expenses in the sales territory segmented statement will become common fixed expenses in the individual store segmented statement.
Managers will often allocate common fixed expenses to business segments because:
they believe this practice will ensure that the company’s common fixed expenses are covered.
All other things the same, in periods of increasing sales, net operating income will tend to increase more rapidly in a company with high fixed costs and low variable costs than in a company with high variable costs and low fixed costs.
True
For a capital intensive, automated company the break-even point will tend to be higher and the margin of safety will be lower than for a less capital intensive company with the same sales.
True
All other things the same, an increase in total fixed expenses will increase the break-even point.
True
All other things the same, an increase in variable expense per unit will reduce the break-even point.
False
One of the advantages of allocating common fixed costs to a product is that such allocations more accurately reflect the product’s true profitability.
False
When a company has a production constraint, total contribution margin will be maximized by emphasizing the products with the lowest contribution margin per unit of the constrained resource.
False
Joint costs are relevant in the decision to sell a product at the split-off point or to process the product further.
False
A common fixed cost is a fixed cost that supports more than one business segment and is traceable in whole or in part to at least one of the business segments.
False
A transfer price is the price charged when a company provides goods or services to an outside company.
A transfer price is the price charged when a company provides goods or services to an outside company.
The selling division in a transfer pricing situation should want the transfer price to cover at least the variable cost per unit plus the lost contribution margin per unit on outside sales.
True
Opportunity cost should be ignored in setting the transfer price.
false
When a division is operating at full capacity, the transfer price to other divisions should not include opportunity costs.
False

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